#103: Small Caps have a Big Day

S2N Spotlight

The market commentators I follow are all tripping over themselves, trying to find as many permutations of how the Russell 2000’s performance over the last few days is rare. There is no question that this kind of price action is noteworthy. For those who missed it, the Russell 2000 (small caps) rallied 5.3% yesterday.

I have been sharing the ratio of performance between the SP500 and the Russell 2000 (large vs. small caps) over the last few weeks. The ratio shows large caps outperforming small caps since around 2015. COVID threw a spanner in the works. As you can see in the 2 charts below, this week there has been quite a sharp reversal. This is something to watch.

S2N Observations

I would be remiss not to mention that Gold made another all-time high. I think this is probably the best gauge of inflation expectations. Bitcoin is also enjoying a strong week after a weak June.

Coming back to the SP500, it has been an unusually long time since it has had a -2% day.

You may have seen the release of US Retail Sales yesterday. The 12-month year-on-year growth was around 2%. Before you think that the performance of the time series reported for June is reasonable, remember that it is before taking inflation into account. When adjusting for inflation, Retail Sales were negative.

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